[Federal Register Volume 66, Number 208 (Friday, October 26, 2001)]
[Notices]
[Pages 54229-54232]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 01-26940]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-437-805]
Notice of Initiation of Countervailing Duty Investigation:
Sulfanilic Acid From Hungary
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Initiation of countervailing duty investigation.
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SUMMARY: The Department of Commerce is initiating a countervailing duty
investigation to determine whether manufacturers, producers, or
exporters of sulfanilic acid from Hungary receive countervailable
subsidies.
EFFECTIVE DATE: October 26, 2001.
FOR FURTHER INFORMATION CONTACT: Melani Miller, AD/CVD Enforcement,
Group I, Office 1, Import Administration, International Trade
Administration, U.S. Department of Commerce, Room 3099, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
0116.
SUPPLEMENTARY INFORMATION:
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (``the Act'') by
the Uruguay Round Agreements Act. In addition, unless otherwise
indicated, all citations to the Department of Commerce's (``the
Department'') regulations are references to the provisions codified at
19 CFR part 351 (April 2001).
The Petition
On September 28, 2001, the Department received a petition filed in
proper form by Nation Ford Chemical Company (``the petitioner''). The
Department received supplemental information to the petition on October
9 and 12, 2001.
In accordance with section 702(b)(1) of the Act, the petitioner
alleges that manufacturers, producers, or exporters of sulfanilic acid,
the subject merchandise, from Hungary receive countervailable subsidies
within the meaning of section 701 of the Act, and that such imports are
materially injuring, or threatening material injury to, an industry in
the United States.
The Department finds that the petitioner filed this petition on
behalf of the domestic industry because it is an interested party as
defined in section
[[Page 54230]]
771(9)(C) of the Act and has demonstrated sufficient industry support.
See Determination of Industry Support for the Petition section, below.
Scope of Investigation
Imports covered by this investigation are all grades of sulfanilic
acid, which include technical (or crude) sulfanilic acid, refined (or
purified) sulfanilic acid and sodium salt of sulfanilic acid.
Sulfanilic acid is a synthetic organic chemical produced from the
direct sulfonation of aniline and sulfuric acid. Sulfanilic acid is
used as a raw material in the production of optical brighteners, food
colors, specialty dyes and concrete additives. The principal
differences between the grades are the undesirable quantities of
residual aniline and alkali insoluble materials present in the
sulfanilic acid. All grades are available as dry, free flowing powders.
Technical sulfanilic acid, classifiable under the subheading
2921.42.22 of Harmonized Tariff Schedule (``HTS''), contains 96 percent
minimum sulfanilic acid, 1.0 percent maximum aniline, and 1.0 percent
maximum alkali insoluble materials. Refined sulfanilic acid, also
classifiable under 2921.42.22 of the HTS, contains 98 percent minimum
sulfanilic acid, 0.5 percent maximum aniline and 0.25 percent maximum
alkali insoluble materials.
Sodium salt (sodium sulfanilate), classifiable under HTS subheading
2921.42.90, is a powder, granular or crystalline material which
contains 75 percent minimum equivalent sulfanilic acid, 0.5 percent
maximum aniline based on the equivalent sulfanilic acid content, and
0.25 percent maximum alkali insoluble materials based on the equivalent
sulfanilic acid content.
Although the HTS subheadings are provided for convenience and
customs purposes, the written description of the scope of this
investigation is dispositive.
This scope is identical to the scope of the antidumping duty order
on Sulfanilic Acid from the People's Republic of China. See Antidumping
Duty Order: Sulfanilic Acid from the People's Republic of China, 57 FR
37524 (August 19, 1992) (as currently reflected in Sulfanilic Acid from
the People's Republic of China; Preliminary Results and Preliminary
Partial Rescission of Antidumping Duty Administrative Review, 66 FR
47003 (September 10, 2001)). Nevertheless, during our review of the
petition, we discussed the scope with the petitioner to ensure that it
accurately reflects the product for which the domestic industry is
seeking relief. Moreover, as discussed in the preamble to the
Department's regulations (see Antidumping Duties; Countervailing
Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), we are setting
aside a period for parties to raise issues regarding product coverage.
The Department encourages all parties to submit such comments within 20
days of publication of this notice. Comments should be addressed to
Import Administration's Central Records Unit (``CRU'') at Room 1870,
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230. The period of scope consultations is intended to
provide the Department with ample opportunity to consider all comments
and consult with parties prior to the issuance of our preliminary
determination.
Consultations
Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department
invited representatives of the Government of Hungary (``GOH'') for
consultations with respect to the petition filed in this proceeding.
The Department held consultations with the GOH on October 9, 2001. The
points raised in the consultations are described in the Memorandum to
the File, ``CVD Consultations with Officials from the Government of
Hungary,'' dated October 9, 2001, which is on file in the Department's
CRU, Room B-099 of the main Department of Commerce building.
Determination of Industry Support for the Petition
Section 702(b)(1) of the Act requires that a petition be filed on
behalf of the domestic industry. Section 702(c)(4)(A) of the Act
provides that a petition meets this requirement if the domestic
producers or workers who support the petition account for: (1) At least
25 percent of the total production of the domestic like product; and
(2) more than 50 percent of the production of the domestic like product
produced by that portion of the industry expressing support for, or
opposition to, the petition.
Section 771(4)(A) of the Act defines the ``industry'' as the
producers of a domestic like product. Thus, to determine whether the
petition has the requisite industry support, the Act directs the
Department to look to producers and workers who account for production
of the domestic like product. The International Trade Commission
(``ITC''), which is responsible for determining whether ``the domestic
industry'' has been injured, must also determine what constitutes a
domestic like product in order to define the industry. While both the
Department and the ITC must apply the same statutory definition
regarding the domestic like product (section 771(10) of the Act), they
do so for different purposes and pursuant to separate and distinct
authority. In addition, the Department's determination is subject to
limitations of time and information. Although this may result in
different definitions of the domestic like product, such differences do
not render the decision of either agency contrary to the law. See
Algoma Steel Corp. Ltd., v. United States, 688 F. Supp. 639, 642-44
(CIT 1988); High Information Content Flat Panel Displays and Display
Glass Therefore from Japan: Final Determination; Rescission of
Investigation and Partial Dismissal of Petition, 56 FR 32376, 32380-81
(July 16, 1991).
Section 771(10) of the Act defines the domestic like product as ``a
product that is like, or in the absence of like, most similar in
characteristics and uses with, the article subject to an investigation
under this title.'' Thus, the reference point from which the domestic
like product analysis begins is ``the article subject to an
investigation,'' i.e., the class or kind of merchandise to be
investigated, which normally will be the scope as defined in the
petition.
The domestic like product referred to in the petition is the single
domestic like product defined in the Scope of Investigation section
above. The Department has no basis on the record to find this
definition of the domestic like product to be inaccurate. The
Department, therefore, has adopted this domestic like product
definition.
The Department has determined that the petition contains adequate
evidence of industry support; therefore, polling is unnecessary. See
Industry Support section from the October 18, 2001 Initiation
Checklist, which is on file in the Department's CRU. Information on the
record demonstrates that the producer who supports the petition
accounts for more than 50 percent of the production of the domestic
like product. Additionally, no interested party pursuant to section
771(b)(A), (C), (D), (E) or (F) of the Act has expressed opposition on
the record to the petition. Accordingly, the Department determines that
this petition is filed on behalf of the domestic industry within the
meaning of section 702(b)(1) of the Act.
Injury Test
Because Hungary is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, section 701(a)(2) applies to this
investigation. Accordingly, the ITC must determine whether imports of
the
[[Page 54231]]
subject merchandise from Hungary materially injure, or threaten
material injury to, a U.S. industry.
Allegations and Evidence of Material Injury and Causation
The petition alleges that the U.S. industry producing the domestic
like product is being materially injured, or is threatened with
material injury, by reason of the imports of the subject merchandise.
The petitioner contends that the industry's injured condition is
evident in the declining trends in employment, domestic prices,
production, and net sales volume and value. The allegations of injury
and causation are supported by relevant evidence including U.S. Customs
import data, lost sales, and pricing information. We have assessed the
allegations and supporting evidence regarding material injury and
causation, and have determined that these allegations are properly
supported by accurate and adequate evidence, and meet the statutory
requirements for initiation (see Initiation Checklist).
Allegations of Subsidies
Section 702(b) of the Act requires the Department to initiate a
countervailing duty proceeding whenever an interested party files a
petition on behalf of an industry, that (1) alleges the elements
necessary for an imposition of a duty under section 701(a), and (2) is
accompanied by information reasonably available to the petitioner
supporting the allegations.
Initiation of Countervailing Duty Investigation
The Department has examined the countervailing duty petition on
sulfanilic acid from Hungary and found that it complies with the
requirements of section 702(b) of the Act. Therefore, in accordance
with section 702(b) of the Act, we are initiating a countervailing duty
investigation to determine whether manufacturers, producers, or
exporters of sulfanilic acid from Hungary receive countervailable
subsidies.
A. Change in Ownership
The petitioner alleges that, in November 1997, Nitrokemia, a
government-owned entity, was split into two parts: Nitrokemia 2000,
which received certain of the former Nitrokemia's assets including the
sulfanilic acid production facilities, and Nitrokemia Rt., which
received the remainder of the former Nitrokemia's assets and the former
Nitrokemia's environmental liabilities. According to its web site,
Nitrokemia 2000 continued to be a fully-owned subsidiary of the former
Nitrokemia (now Nitrokemia Rt.) until May 1998, at which point it
became an independent stock company owned by the State Privatization
Company. Subsequently, in November 2000, Nitrokemia 2000 was
privatized.
The petitioner alleges that the current Nitrokemia 2000 is the same
``person'' as it was prior to its privatization. Thus, consistent with
the Department's recent Final Results of Redetermination Pursuant to
Court Remand in Acciai Speciali Terni S.p.A. v. United States., et al.,
(Ct. No. 99-06-00364) (December 19, 2000), the past countervailable
subsidies received by pre-privatized Nitrokemia 2000 would continue to
be countervailable after the change in ownership. We will examine this
issue in the course of the investigation to determine whether any non-
recurring subsidies provided to Nitrokemia 2000 prior to its
privatization should be attributed to Nitrokemia 2000 in our period of
investigation.
B. Creditworthiness
The petitioner alleges that the former Nitrokemia, Nitrokemia Rt.,
and Nitrokemia 2000 were uncreditworthy from 1997 through 2000. To
support its allegation, the petitioner states that the financial
statements for all three companies show that they have all been
unprofitable since 1997, and that these companies could not possibly
borrow money without government guarantees. The petitioner further
claims that no company with such substantial environmental liabilities
(see Programs section, below, as well as the Initiation Checklist)
would be able to successfully borrow funds from any commercial
institution. As additional support, the petitioner provided a current
Dun and Bradstreet report for Nitrokemia 2000, as well as a financial
analysis derived from Nitrokemia 2000's financial statement for 2000.
With respect to the petitioner's uncreditworthiness allegations for
1999 and 2000, as noted below in the Programs section, we are not
initiating an investigation of any alleged subsidies bestowed in those
years. Thus, we are not initiating a creditworthiness investigation for
1999 and 2000. If, however, in the course of this investigation we
discover that any non-recurring subsidies, loans, or loan guarantees
were bestowed during 1999 and 2000, we will consider any new
uncreditworthiness allegations made at that time.
With respect to 1997 and 1998, which is the time period during
which the former Nitrokemia was split and the contingent environmental
liabilities were assigned to Nitrokemia Rt. (see Programs section,
below, as well as the Initiation Checklist), the petitioner must
establish a reasonable basis to believe or suspect that a company was
uncreditworthy in each of these years in order for the Department to
investigate the company's creditworthiness. Pursuant to section
351.505(a)(4)(i) of the Department's regulations, the Department will
generally consider a firm to be uncreditworthy if, based on information
available at the time of the government-provided loan, the firm could
not have obtained long-term loans from conventional commercial sources.
In this instance, the only evidence provided by the petitioner
relating to these years was the companies' financial statements which
showed losses. While a loss in a particular year may provide some
information about a company's financial position, the Department looks
not only to present indicators but also to past indicators of financial
health (see section 351.505(a)(4)(i)(B) of the Department's
regulations) and to present and past indicators of the firm's ability
to meet its costs and fixed financial obligations (see section
351.505(a)(4)(i)(C) of the Department's regulations). In both the
petition and the petitioner's response to the Department's supplemental
petition question with respect to the uncreditworthiness allegations,
the petitioner did not provide financial ratios to support its
creditworthiness argument for 1997 and 1998. Moreover, although the
petitioner provided the financial statement for old Nitrokemia for 1997
from which 1997 financial ratios could be derived, the petitioner did
not provide any information or financial statements that could be used
to derive financial ratios for any of the preceding years. Thus,
because the petitioner did not provide sufficient relevant evidence to
support a reasonable basis to believe or suspect that these companies
were uncreditworthy in 1997 and 1998, we are also not initiating a
creditworthiness investigation for these years.
C. Programs
We are including in our investigation the following program alleged
in the petition to have provided a countervailable subsidy to producers
and exporters of the subject merchandise in Hungary:
Forgiveness of Environmental Liabilities
We are not including in our investigation at this time the
following programs alleged to benefit producers and exporters of the
subject merchandise in Hungary:
[[Page 54232]]
1. Forgiveness of Short-Term Liabilities. The petitioner alleges
that, because the combined short-term liabilities listed on the 1998
financial statements from Nitrokemia Rt. and Nitrokemia 2000 are
significantly smaller than the short-term liabilities listed on the
former Nitrokemia's 1997 financial statements, the GOH forgave some of
the former Nitrokemia's short-term liabilities when the company was
split.
The petitioner has not provided sufficient evidence that any short-
term debts were actually forgiven by the GOH. Although the combined
short-term debts were less than the short-term debts from the former
Nitrokemia's financial statements, the petitioner has provided no
evidence that the short-term debt was not simply paid off or converted
to long-term debt. Thus, lacking sufficient evidence of a financial
contribution or a benefit from the GOH at this time, we are not
including this program in our investigation.
2. Provision of Natural Gas for Less Than Adequate Remuneration.
The petitioner alleges that the GOH subsidizes the price of natural gas
to the Hungarian industry because natural gas prices in Hungary are
significantly lower than they are in the rest of the world. Without
this alleged subsidy, the petitioner states that the cost of natural
gas for Nitrokemia 2000's sulfanilic acid production would be one
percent higher.
The petitioner has provided no evidence to support its claim that
the GOH provided natural gas for less than adequate remuneration to a
specific enterprise or industry in Hungary. The petitioner admits that
it was not able to locate any information that this alleged provision
of low-priced natural gas was not generally available in Hungary. Thus,
because no information was provided in support of the specificity
claim, at this time we are not including this program in our
investigation.
Distribution of Copies of the Petition
In accordance with section 702(b)(4)(A)(i) of the Act, a copy of
the public version of the petition has been provided to the GOH. We
will attempt to provide a copy of the public version of the petition to
each exporter named in the petition, as provided for under section
351.203(c)(2) of the Department's regulations.
ITC Notification
We have notified the ITC of our initiation, as required by section
702(d) of the Act.
Preliminary Determination by the ITC
The ITC will determine no later than November 13, 2001, whether
there is a reasonable indication that imports of sulfanilic acid from
Hungary are causing material injury, or threatening to cause material
injury to, a U.S. industry. A negative ITC determination will result in
the investigation being terminated; otherwise, the investigation will
proceed according to statutory and regulatory time limits.
This notice is issued and published pursuant to section 777(i) of
the Act.
Dated: October 18, 2001.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 01-26940 Filed 10-25-01; 8:45 am]
BILLING CODE 3510-DS-P